DSP Merrill Lynch offers SIP with life insurance

DSP Merrill Lynch Mutual Fund has launched a new option for investors who are looking for life insurance cover along with market-linked returns.

The new product is called DSP Merrill Lynch Super SIP. Under this facility, investments made through a monthly systematic investment plan (SIP) also provide investors with a life insurance cover.

According to the fund, the facility will allow investors to save regularly with a financial goal in mind, while providing life insurance to cover the likely deficit in savings because of the premature death of the investor.

According to S Naganath, president and CIO of DSP Merrill Lynch Fund Managers, the product will encourage investors to invest systematically in equities and, thus, benefit from the twin concepts of rupee cost averaging and the power of compounding.

Under the facility, investors will have two broad options, viz a variable cover, which is available for tenures of 6, 11 and 16 years and a fixed cover, which is available for a tenure of 21 years. It also provides for liquidity as an investor can withdraw his investments without loss of the life insurance cover, where one can withdraw any amount under the variable cover option and up to the capital appreciation after three years under fixed cover option.

The scheme will provide life insurance up to Rs 20 lakhs with no medical check-up, subject to providing a declaration of good health. It also allows a wide choice of schemes under the DSP Merrill Lynch mutual fund equity stable, to invest in.

The schemes where investments can be made are DSP Merrill Lynch TIGER fund, DSP Merrill Lynch Opportunities fund, DSP Merrill Lynch Top 100 Equity fund and DSP Merrill Lynch Equity Fund.

Investors will also have the option of switching among them anytime and any number of times without charge. The introductory offer starts on September 9, 2005 until October 25, 2005.

The concept of adding mutual fund returns added to insurance is nothing new as exemplified by the success of unit linked plans (ULIPs). Unit Trust of India offers a ULIP, which is basically a tax saving cum insurance scheme. But unlike DSP Merrill Lynch's scheme, it invests not less than 60 per cent of the funds in debt instruments.